The Effect of Entrepreneurial Competencies, Business Innovation, and Management Strategies on the Success of Micro, Small, and Medium-Sized Enterprises (MSMEs) in Jatinegara Village, Cakung Subdistrict, East Jakarta City

Abstract

Micro, Small, and Medium-Sized Enterprises (MSMEs) play a strategic role in Indonesia’s economy through their contributions to employment, income generation, and economic development. However, MSMEs continue to encounter challenges related to limited entrepreneurial capabilities, innovation, and systematic business management, which may constrain their success and sustainability. This study aims to examine the effects of entrepreneurial competence, business innovation, and management strategy on the success of MSMEs in Jatinegara Village, Cakung Subdistrict, East Jakarta, both partially and simultaneously, also examines the mediating role of business innovation in the relationships between entrepreneurial competence, management strategy and MSME success. The study employed an associative quantitative approach with a descriptive-verification design. Data were collected through a five-point Likert-scale questionnaire administered to 189 MSME owners or managers selected using purposive sampling, with at least one year of business operation as a screening criterion. Data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM), encompassing measurement model (outer model) and structural model (inner model) evaluation, with bootstrapping-based hypothesis testing for both direct effects and the mediating role of business innovation. The results show that management strategy has the strongest direct effect on MSME success (? = 0.448; p < 0.001), while entrepreneurial competence exerts a marginally significant direct effect (? = 0.160; p = 0.051). Entrepreneurial competence and management strategy both strongly influence business innovation (? = 0.544, p < 0.001; and ? = 0.315, p < 0.001, respectively), while business innovation itself has a marginally significant direct effect on MSME success (? = 0.168; p = 0.059). Business innovation was also found to marginally mediate the effects of entrepreneurial competence (indirect effect = 0.091; p = 0.067) and management strategy (indirect effect = 0.053; p = 0.074) on MSME success. Entrepreneurial competence and management strategy jointly explain 62.1% of the variance in business innovation (R² = 0.621), while all three variables jointly explain 49.2% of the variance in MSME success (R² = 0.492). The study concludes that strengthening entrepreneurial competence, innovation capabilities, and strategic management practices is essential for improving MSME competitiveness, resilience, and sustainable business success.